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  • Belvedere Group

July 2023 Market Commentary

Updated: Oct 4, 2023

Developed Markets Update

Executive Summary

  • The month of July 2023 was largely encompassed with the second-quarter earnings results from major blue-chip companies in the developed markets. Three leading banks from the United States – Citi, JP Morgan, and Wells Fargo – opened the doors of the earning season with stellar performances, as top and bottom line numbers exceeded expectations as the interest rate increases provided support in the net interest income of these financial institutions. Anchored on this, we posit that the monetary tightening campaign by the Federal Reserve has been profitable to banks as customers’ payments on loans have headed north, with policymakers signalling more rate hikes in the loom to further have a grip on prices to the preferred rate of the apex bank.

  • In a similar approach to its American counterpart, the European Central Bank (ECB) increased its interest rate for the ninth consecutive time by 25 basis points (0.25%) as the apex bank seeks to curtail the rising inflation in the eurozone. This decision marked one year of consecutive rate hikes in the continent after the ECB commenced its campaign to cushion high inflation last July but we forecast that an end in sight could be on the horizon in the Eurozone area.

Markets Summary

The developed markets witnessed a positive return in July 2023 across all three indices with the MSCI World Index, FTSE 100, and the S&P 500 closing the month with gains of 3.36%, 3.58%, and 3.18% respectively.

Performance Analysis:

In our $10K comparative analysis, the S&P 500 continued to lead the pack with its generation of higher returns for investors with a total return of $31,106.55 over an investment duration of ten years with an initial investment of $10,000. This outperformed the returns generated by the MSCI World and FTSE 100 of $24, 343.42 and $14,390.66 respectively. Thus, we can objectively assert that the superiority of returns in a passive investment selection would be attained from the S&P 500 in comparison to the other aforementioned indices in the developed markets.

These impressive returns were unsurprisingly attributed to the gains recorded by the blue-chip companies like Meta, Alphabet, and NVIDIA. Furthermore, one of the world’s leading banks JP Morgan also saw an impressive monthly gain which led to its inclusion amongst the top contributors to the MSCI World in July 2023 as shown in our Top 5 contributors’ chart below. Additionally, the returns from these prominent companies were also attributed to the impressive numbers reported in their top and bottom lines following the release of their second-quarter earnings.

Second Quarter Earnings Sees Banks Outperform Expectations

Blue-chip firms commenced their second quarter releases for the year 2023 and this provides insights on the financial health of these firms for the year under review. The impressive numbers from the banks in their profits were largely attributed to the gains recorded in line items profited by the interest rate increases by the monetary authorities which have seen rates in the United States presently a record range of 5.25%-5.5%, the highest in over two decades.

Consequently, these hikes by the United States seemed to reap positive fruits following the increase in the net interest incomes by 44%, 29%, and 16% respectively for JP Morgan, Wells Fargo, and Citi. In other earnings results, BlackRock, the world’s largest asset management company, reported an increase in its asset under management (AUM) to $9.4 trillion, attributed to the bullish sentiment of investors to the company’s funds, triggering profit to outperform second quarter figures reported last year.

JPMorgan Chase & Co. Price Chart YTD:

We believe that these earnings releases of blue-chip banks have offered more optimism and a glimpse of normalcy to the financial sector following the drama that unfolded with the collapse of Silicon Valley Bank (SVB). However, the purchasing power of Americans could be adversely affected as further rate hikes are projected to reduce the borrowing abilities of debtors and increase the cost of repayment on loans. Thus, this could cause increased defaults in repayments but the impressive signs of prices decelerating could mean an end to the rate increases might be forthcoming sooner than expected.

European Central Bank Raises Interest Rate to 3.75%

According to a report from the ECB, the region’s inflation rate closed at 5.5% in June 2023, lower than the 6.1% recorded in May. Consequently, the apex monetary authority justified the quarter basis point hike of the rate to 3.75% as inflation remains far above the ECB’s target of 2%. This is expected to reduce the purchasing power of the people because as the rate increases, it becomes more expensive and unattractive for people to borrow and consequently less available to spend to purchase goods and services. With Thursday’s quarter-point increase, the ECB has raised its benchmark deposit rate from minus 0.5% to 3.75% in one year, the fastest credit tightening since the euro currency was launched in 1999.

ECB Rate Hike Impact on Lending and Prices:

Households and businesses are facing a double hit from price spikes and higher rates, which makes it more expensive for people to obtain loans to purchase homes and cars or for companies to get new equipment or build facilities. However, the ECB President has affirmed that the bank’s governing council would maintain “an open mind” as to its next line of actions in subsequent policy meetings. Hence, we believe that the rapid rate hikes might be reaching their end in the coming months as they continue to impact home prices and the economic growth of the eurozone which has already witnessed consecutive quarters of contraction.

Emerging Markets Update

Executive Summary

  • The South African equity market continued its upward trend despite the increasing macroeconomic crisis in the country. Thus, we anticipate that the country’s stock market is poised to reach an all-time high and increase its foreign direct investment in five years to a record figure.

  • In a similar approach, China is currently undergoing a new development to transform from its recent woes. The country’s Politburo has been intentional in resolving the country’s economic challenges which stemmed from the post-covid rebound and the Sino-China political tension that has affected China’s economy and direct investment remittance. Anchored on this, we believe that the ray of hope will continue to shine on China and a positive cyclical economic rebound by 2024. However, the success may be pedalled down because of the little distrust in Politburo’s policy implementation.

Market Summary

The emerging markets witnessed a positive return in July 2023 with net returns of 6.23% and 3.36% for the MSCI EM and MSCI World Index respectively. On a year-to-date basis, these indices remained positive at 8.35% and 13.48% respectively.

Performance Analysis:

In summary of the performance analysis, Tencent had an impressive performance which was attributed to the surge in its industry's large language model while the Taiwan Semiconductor Manufacturing Co Ltd offers investors an excellent entry point as it had established itself as the go-to company for chips. Additionally, the returns from Meituan, Alibaba Group, and Petroleo Brasileiro were attributed to the impressive figures in their recently released H1 2023 results. Hence, these drivers make the top 5 contributors more enticing for investors.

Equity Returns Peak as South Africa Unleashed Inner Bull

According to Deutsche Welle (DW), one of Germany’s most successful international media outlets, South Africa has been the major destination of equities and foreign direct investment in Africa. Its equity market reached an all-time high in January 2023 and has maintained an elevated level till July with 78,450 index points. As the BRICS is becoming a viable alternative to the existing economic order, South Africa is also increasing its stakes as the destination for direct and portfolio investment.

South Africa Stock Market Index (Composite):


The equity market in South Africa tends to ignore the country's macroeconomic crisis, as it rallied upward in July with optimism surrounding growth in the market. Why is this situation possible? Major publicly listed companies in South Africa which accounted for about two-thirds of the stock exchange market, such as British American Tobacco and BHP Billiton have a strong international presence and use currencies such as Dollar while others have their currency capitalized in local currency i.e., rand. Anchored on this, we forecast that the South African economy will attract huge proportions of Africa’s investment and provide the most liquid exchange in Africa as it offers a wide array of investments in banking, mining, and other industrial activities.

A Glimpse of Hope for China After Politburo's Policy Implementation

The economic downturn in China deepens as Refinitiv data reported that China’s focused mutual funds suffered a net outflow of $674 million in Q2 2023 while other emerging markets excluding China received nearly $1 billion in the same period. The country’s Politburo released a wide-ranging policy document detailing consumption-related initiatives and separate reports for Chinese mega cities such as Beijing and Shenzhen in a bid to lessen the tightened outlooks of the property sector in both cities. Other issues addressed by the Politburo also included tackling local debt issues, unemployment, and boosting local demand.

Have these recent changes in China shown any differences?

Chinese stocks and equities headed northward as it delivered on an optimistic note while delivering impressive numbers since January 2023. Although a flash of good news was visible worldwide, there is little distrust towards the Politburo because of its past record of lack of policy implementation disappointments.

Companies with huge market capitalization such as Alibaba Group and Baidu Inc. recorded at least a 5% increase while other listed companies jumped as high as 3.2%. Honeymoon also extended to the CSI 300 Index of Mainland whose main shares rose to 0.6% and the gauges of real estate shares are nearing a bull market.

Stock Market Reacts with Upward Tick as Optimistic Investors Follow Politburo’s Meetings:

However, we opine that for recent economic changes to be sustained, Politburo’s promises must translate to an actionable implementation of these recent policies. Major international investment firms have continued their revision of their China forecast as asserted by Rhodium’s Analysts who stated that “there is a case emerging for a cyclical rebound in China’s economy in early 2024 which is probably the period the Chinese economy may be out of the wood of economic downturn. However, if Beijing fails to uphold this, the economy that is slowly building up its steam might be crushed by political ineptitude”.


The commentary you find on this page is for information only; it is not intended as research or a recommendation suitable to your individual circumstance. Please seek financial advice from a professional before acting on investment decisions.

As is the very nature of investing, there are inherent risks, and the value of your investments will both rise and fall over time. Please do not assume that past performance will repeat itself and you must be comfortable in the knowledge that you may receive less than you originally invested.


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